2024 is coming to an end, in stark contrast to the crypto winter of 2022. We want to pause and reflect on a momentous year for the cryptocurrency industry.
2024 has been one of the most impactful years in the history of cryptocurrencies, from the launch of the Bitcoin ETF to Bitcoin's triumphant breakthrough of $100,000 after the elections.
In this article, we revisit the major developments that have shaped the digital asset industry in 2024 from a data-driven perspective.
Driven by the explosive success of the Bitcoin ETF in January, the cryptocurrency market experienced a strong growth phase in the first quarter, with Bitcoin soaring to a new all-time high of $73,000. This was followed by a relatively calm consolidation period, characterized by a weakening of catalysts and a significant redistribution of supply by major market participants. Now, as 2024 draws to a close, optimism has returned, driven by US government support for cryptocurrencies and the start of a rate-cutting cycle.
Bitcoin (BTC) has undoubtedly been the focus this year, with a year-to-date gain of 125%, outperforming traditional asset classes and cryptocurrencies. Solana (SOL) has led the market multiple times during this cycle, with a year-end gain of 78%, while Ethereum (ETH) has continued to underperform, rising 44% for the full year.
The chart shows the top 30 cryptocurrencies by market capitalization exceeding $1 billion in the datonomy TM space. Driven by retail enthusiasm, meme coins like DOGE and PEPE have garnered widespread attention, while "dinosaur coins" like Ripple (XRP) and Stellar (XLM) have made an unexpected comeback. Alternative Layer-1s like Sui (SUI) and mature blue-chip DeFi protocols like Aave have also gained attention, reflecting the shifting investor sentiment and themes shaping the 2024 market.
Q1: ETF Floodgates Open, Memecoin Frenzy, Ethereum Expands with Blobs
The arrival of the spot Bitcoin ETF triggered a wave of mass adoption, opening the floodgates for Wall Street. The assets under management (AUM) of 11 issuers currently exceed $105 billion, with these tools holding over 1.2 million Bitcoins. This represents 5.6% of the current Bitcoin supply, and the corporate balance sheet demand has further accelerated the pace of supply absorption. In less than a year since its launch, the spot Bitcoin ETF has experienced robust flows, cementing its position as the most successful debut of any ETF category in history.
Weekly flows show sustained accumulation, with net inflows exceeding $2 billion in peak weeks, although occasional outflows occur during the summer market consolidation period.
While Bitcoin drove institutional adoption and lifted the overall market, meme coins began to attract significant attention, leading to a surge driven by extreme risk-taking. In early March, meme coin spot trading volume reached $13 billion, with the market capitalization of major meme coins reaching $60 billion.
While established large-cap memecoins saw some growth, most of the activity stemmed from the proliferation of new meme coins launched on Solana. A platform called pump.fun became the epicenter of the meme coin explosion in Q1, facilitating the creation of over 75,000 tokens and pushing Solana's active wallets to a then-record 2.06 million. Although these high levels of activity were unsustainable, meme coins have made a comeback, with trading volume exceeding $23 billion in November. Platforms like Virtuals on Base have injected new vitality into this phenomenon.
March also marked an important milestone for Ethereum, as it deployed EIP-4844 in the Dencun upgrade. Shortly after, Ethereum's Layer 2 Rollups adopted the new blob transaction fee market in parallel with the mainnet. This laid the foundation for Ethereum to expand its execution scope with the help of Layer 2s like Base, Optimism, and Arbitrum, while reducing settlement costs on the Layer 1, making transactions more affordable on the network. Demand for blobs has remained strong, with Ethereum consistently reaching its target capacity of 3 blobs per block within seven months of launch.
While this has made the Ethereum ecosystem more accessible, it can be argued that the reduction in Layer 1 fees has hindered ETH's value accrual, and also led to a more fragmented user experience. However, the space shows no signs of exhaustion, with prominent exchanges like Kraken and Uniswap, as well as enterprises like Deutsche Bank and multinational conglomerates (Sony), driving Layer 2 adoption, and further increases in blob capacity on the horizon.
Q2: Summer Doldrums: Supply Season Kicks In
The second quarter was characterized by a consolidation period, with the market in a range-bound mode due to a lack of catalysts. In April, Bitcoin experienced its quadrennial halving event, with the daily issuance reduced from 900 to 450 coins. Like the halving event, this marked a turning point for the mining industry, forcing miners to adapt to the reduced block subsidies. This event triggered upgrades to more efficient ASIC hardware, further consolidation in the mining industry, and prompted some miners to repurpose their infrastructure for AI data centers to diversify their revenue streams.
As shown in the chart below, transaction fees have become a critical component of mining revenue, partially offsetting the decline in block subsidies. Nevertheless, the overall hash price (daily USD revenue per TH/s) remains under pressure, reflecting miners' increasing reliance on network activity to maintain sustainability.
Exacerbating these challenges is additional supply pressure. The most notable of these is the long-awaited Mt. Gox bankruptcy asset distribution, with thousands of BTC re-entering the market. Similarly, the German government sold over 50,000 BTC seized in a criminal investigation, adding to the sell-side pressure and amplifying supply dynamics. Despite these sell-offs, Bitcoin's liquidity has remained resilient, absorbing the supply without causing significant disruption to market stability. Looking ahead, as FTX creditors are set to receive cash distributions in 2025 and potentially re-enter the market, sell-side pressure may ease.
Q3: Stablecoins and the Spring of Tokenization
Stablecoins have been recognized as the "killer app" of cryptocurrencies, and their global significance has begun to permeate beyond the crypto industry. Stablecoins continue to export US dollars globally, with a total supply exceeding $210 billion. USDT ($138 billion) and USDC ($42 billion) remain dominant, with the majority of stablecoin supply tilted towards the Ethereum network, accounting for $122 billion. Overall, stablecoins facilitated $1.4 trillion in monthly (adjusted) transaction volume in November.
While the role of stablecoins as a medium of exchange and store of value in emerging economies has been widely explored, their utility in payment and financial services infrastructure has further accelerated with Stripe's acquisition of Bridge. Additionally, 99% of stablecoins are pegged to the US dollar, and Tether and Circle have directly invested nearly $100 billion in US Treasuries, further cementing their position as key tools in maintaining the global dominance of the US dollar.
At the same time, BlackRock entered the tokenization field and launched the BlackRock Digital Dollar Institutional Liquidity Fund (BUIDL), investing in dollar-equivalent assets such as cash and US Treasuries. The supply of BUIDL quickly reached 500 million, expanding the landscape of tokenized securities on public BlockChains. The ecosystem expanded in 2024, providing stablecoins with different risk profiles, liquidity, collateral, and savings mechanisms. USDe from Ethena stood out, growing from $91 million to $6 billion in market capitalization, becoming the third largest stablecoin, utilizing positive funding rates to provide attractive yields for holders. Meanwhile, First Digital USD (FDUSD) has risen to prominence as a source of liquidity and a widely used quote currency on exchanges.
Regulatory authorities have increasingly focused on stablecoins, reflecting the growing importance of stablecoins in the global financial system. The European Union has implemented specific requirements for stablecoins under the Crypto Asset Markets (MiCA) regulation, which has begun to reshape the stablecoin industry pegged to the Euro.
Q4: Election Frenzy
The 2024 US presidential election had a profound impact on the digital asset market, driving BTC to break $100,000 for the first time. Specialized coins (including meme and privacy coins) and smart contract platforms in Coin Metrics' datonomy TM domain were standout performers, with returns of 129% and 84% respectively since the election.
In the run-up to the election, we also witnessed the rise of prediction markets like Polymarket, which played a key role in aggregating the collective wisdom on election outcomes. At its peak, Polymarket's open interest value exceeded $450 million. Although the platform's activity has since subsided, it demonstrated the utility and potential of information markets on public BlockChains.
After the election, market sentiment was buoyant, bolstered by the government's pro-crypto stance, a stark contrast to the regulatory resistance of the previous SEC regime. Demand for ETFs and corporate bonds drove the rise in Bitcoin, with MicroStrategy's holdings reaching 444,262 BTC, funded by its stock and convertible bond issuances. Institutional interest in the derivatives market hit new highs, reflected in CME's Bitcoin futures open interest reaching a record $22.7 billion, with a total exceeding $52 billion, and the launch of options-based ETFs.
Despite the strong momentum, the implementation and timeline of crypto-friendly policies remain uncertain. While there are clear signs that the regulatory environment will be more supportive of cryptocurrencies, including the appointment of crypto advocates to key positions such as the Chair of the US Securities and Exchange Commission and the Crypto Czar, the specific regulatory framework is still unclear. Market enthusiasm has also been dampened by expectations of rate cuts, with participants cautiously optimistic about 2025.
Nevertheless, 2024 has laid a solid foundation: the launch of a spot Bitcoin ETF, accelerated adoption of stablecoins, significant progress in on-chain infrastructure and applications, and the installation of a pro-crypto government at the start of the easing cycle. As we move into the next year, please stay tuned for our 2025 Crypto Outlook report, where we will explore the key themes and trends shaping the year ahead.
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